dlcBTC: Making Bitcoin Yields Reality
This year, Bitcoin has crossed the chasm into the mainstream with Bitcoin ETFs, Runes Protocol and the hype surrounding BitVM. With this year’s Everything Rally underway, we need to discuss the opportunity cost of holding Bitcoin in cold storage, in custody or bridging this to CeFi/DeFi. None of these allow you to utilise the $1T of liquidity currently locked in Bitcoin in a safer and more profitable way. This is where DLC.Link comes into play.
Until recently, with Bitcoin, you could HODL, stack, spend or send BTC, and that’s about it. Wrapped Bitcoin (wBTC) has been around for many years, but to port this into DeFi or other chains, you must use a bridge: the central attack vector for most hacks in Crypto. For most, the Bridge Risk is too big and much of Bitcoin remains locked in cold storage.
Trusting the code for Bitcoin, we built DLC.Link using Discrete Log Contracts, smart contracts on Bitcoin that work like pseudo-programmable oracles with predetermined conditions. The genesis for dlcBTC was to create self-custody wrapped BTC on-chain to unlock liquidity and generate Bitcoin yields.
How DLC.Link Locks BTC On-Chain
DLC.Link allows merchants to self-lock BTC into DLC lockboxes to mint dlcBTC for use in DeFi yield generation activities. The process of locking BTC on-chain with DLC.Link is meticulous and straightforward:
Locking and Minting: Merchants create a time-locked transaction to secure their Bitcoin, which DLC attestors then lock. These attestors generate key transactions and announcements to ensure transparency and trust, coordinating with smart contracts on Arbitrum to mint dlcBTC tokens.
Claiming and Converting: Merchants claim their dlcBTC tokens through an atomic swap by revealing the secret key. Attestors then authorise the transfer of dlcBTC to the lockbox, converting the pre-funding transaction into a standard one.
Redeeming and Releasing: Users can convert dlcBTC back into BTC, with attestors publishing attestations and unlocking the DLC. Merchants complete the process by signing the transfer of BTC from the DLC lockbox back to their wallet, ensuring secure minting and redemption.
Through these steps, DLC.Link not only ensures the secure integration of Bitcoin into DeFi but also upholds the principles of decentralization and self-custody, empowering users to leverage their Bitcoin for yield generation without compromising on security.
We bring Bitcoin into Ethereum Virtual Machine (EVM) chains without needing an intermediary, a custodian or a bridge. If we can safely teleport BTC into other ecosystems, all chains become Bitcoin L2s. This opens many possibilities for yield creation using these as side chains to Bitcoin. Even die-hard Bitcoin maximalists can see the value creation potential here.
Risk is inherent in all investments, regardless of chain, layer or asset. Let’s be clear: when using Bitcoin, you must choose your risk vector. With dlcBTC, you are choosing smart contract risk. With other solutions, you are choosing either bridge or custody risk. HODL BTC in cold storage, and you are eating the opportunity cost of what you could have done with that BTC to earn yield. dlcBTC offers greater flexibility and a safer way to earn yield on Bitcoin.
Bitcoin is 50 times harder than any other operating system in terms of its UX and limited functionality as it stands today. We are excited about Bitcoin Layer 2s and the functionality they can offer on top of Bitcoin. Until this infrastructure is built, we offer a way to put your BTC to work securely and safely across chains to take advantage of today’s opportunities.
About DLC.Link
DLC.Link harnesses the power of Discrete Log Contracts (DLCs) to establish a trustless bridge between Bitcoin and EVM networks. The company launched dlcBTC, enabling depositors to self-wrap their Bitcoin for DeFi on EVM while retaining full custody of their assets. This innovation transforms Bitcoin’s role in DeFi, empowering depositors to engage in trading, lending, and hedging while maintaining self-sovereignty.
For more details, visit dlc.link, X (Twitter), and Discord.
Aki Balogh
